Collin County chooses against partial retirement privatization

After months of debate, Collin County commissioners have decided not to implement a proposal to partially privatize their employees’ retirement plans.

Instead, the county will stick with its current state-run system with some tweaks to minimize the government’s vulnerability to future recessions.

The decision received unanimous support from the five members of the Commissioners Court on Monday. They voted after months of meetings that featured long discussions about retirement and complaints from county employees.

Many employees greeted the decision with relief. But they still will be expected to sacrifice under the new arrangement. The county will now implement a policy mandating that 8 percent of its payroll costs go toward retirement each year.

Most years, that will be enough to keep benefits at their current level. But, if the market tanks again, it could mean that those benefits will be reduced. That change is necessary, commissioners said, to keep the county’s retirement costs from unexpectedly ballooning out of control.

“What this does is, if there is a major downturn in the market, the employees and the county will share the risk,” County Judge Keith Self said.

The county’s current retirement system is managed by the Texas County and District Retirement System, known as TCDRS. For years, employees have been required to contribute 7 percent of their paychecks to the state-run system each month. The county then matches at a two-to-one rate.

TCDRS then invests that money and guarantees 7 percent growth on the funds each year. When those investments don't achieve that promise, member counties are required to make up the difference.

Self proposed changes because he was worried about the liability Collin County faced if the market turned sour. In 2008, at the peak of the economic downturn, TCDRS sustained major losses, Self noted, and the county contributed more than $50 million in additional funds into the system.

Coming up with that kind of money can be excruciating, he said, especially when the economy is struggling. Under the new plan, the county would have paid its normal amount to TCDRS. If that didn’t make up for the loss, matching benefits would have been reduced until the plan was fully funded again.

But, if current trends continue, that won’t happen often. TCDRS has averaged more than 9 percent growth in its investments over the past 30 years.

That led many opponents of the privatization plan to feel comfortable with the new policy.

“I think it’s fair to the taxpayers and fair to employees,” said Bob Hughes, who presides over the county’s community supervision and corrections department.

Others were more skeptical. Kevin Lawrence, president of the Texas Municipal Police Association, said he worries that the move might be a precursor to further changes. Some elected officials simply don’t like generous employee retirement benefits and will continue to chip away at them, he said.

But Lawrence acknowledged that sticking with TCDRS is preferable to moving to a private plan.

That was what Self initially proposed in September. His original idea included cutting TCDRS contributions to 4 percent of each employee’s pay. Then, county employees would have had the option to put the remaining 3 into a private 401(k)-like account.

Initially, the idea seemed to have the support of the majority of the Commissioners Court. But Self slowly backed away from it amid major pushback from employees and questions about viability from other commissioners.

Still, he said the new plan accomplishes his goal.

“The big thing is that this removes off the table the blank check for unlimited tax dollars to bail out market losses,” Self said.

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